updated 01:50 pm EDT, Sat July 9, 2011

Zune subscription videos said coming to Xbox, WP7

Microsoft is planning a subscription video service that would go beyond the live Xbox TV it promised during its E3 keynote, insiders uncovered Friday. The service mentioned to The Daily would be badged as a Zune service much like the existing pay-per-title store and compete with one of Microsoft's frequent partners, Netflix. The service would "most likely" not be locked to the Xbox and would show up on Windows Phone 7 and Windows PCs.

Whether or not it would follow the traditional month-to-month plan, integrate with the Zune Pass, or bolt on to an Xbox Live Gold subscription wasn't as evident.

The service would address a complaint that Microsoft's video services had been languishing. The Zune Video Marketplace had followed the iTunes model when it launched as the Xbox Live Video Marketplace in 2006 and was considered Microsoft's Trojan horse into the living room, but it hasn't pushed significantly past its original boundaries in intervening years. Netflix, despite its typically older catalog, has 61 percent of the digital video market, owed largely to a low overall price.

A subscription strategy could give Microsoft access to a wider catalog of movies than it has now. It might also be a key to fleshing out a much heavier focus on video with the New Xbox Experience due in the fall, where it will be joined by YouTube and live UFC fights. Windows PCs may get a big benefit as well by getting a truly living room optimized service instead of having to adapt to a strictly web-based subscription service.